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Question. How should one thing about the slower normalization being allocated among three factors . Is the fed more worried about the outlook than the scenario i just described . Is the fed modifying its reaction function, or did Market Participants really understand the way the fed started normalization . Okay. Thats a great question. Let me try to address it. So, you started by pointing out that essentially the u. S. Economy is doing well. We are close to our maximum employment goal with a 4. 9 Unemployment Rate and the median estimates among participants of a longer run normal rate is about 8. 4 . Were close although as ive often pointed out and still continue to personally believe i think theres a little more slack in the labor market than one would surmise by looking at the Unemployment Rate alone, and here im particularly thinking about abnormally high levels of involuntary parttime employment and perhaps we have seen some decline in what i call the cyclical component of labor force participation. But it means there might be some cyclical pronext and can be brought into the labor market, and were close on our maximum imemployment objective. In reason theres reason to believe theres reason to move up. Ive cast some doubt on whether 1. 7 core inflation how much one should read as an uptrend but certainly it might be the case. In light of that what is the what is the fomcs assessment and why did it change, and in particular i assume youre comparing december with march. So in a sense the assessment has not much changed, the baseline Economic Outlook that the committee saw both in december and march looks quite similar. But the committee in march did rethink to some extent the policy path thats appropriate to achieve and an essentially unchanged outlook. So i would say the major thing thats changed between december and march that affects the baseline outlook is a slight ly weaker projected pace of Global Growth. Now, when you ask about you asked me did the reaction the feds reaction function charges and thats an interesting question. Would i say no, but let me talk about that for a second. Sometimes when people think about a reaction function, you think about some simple function relating the stance of policies, the level. Fed funds rate to a few simple measures like gdp or the Unemployment Rate and inflation, and if thats how you think about the reaction function you might say, oh, didnt the reaction function shift because your projections for gdp and inflation changed almost not at all and yet the path for the fed funds rate shifted down a bit. So i would say that i think thats too simplistic a way to think about the reaction function. Were looking at a whole variety of factors name pact the outlook for the u. S. Economy, and when we see a factor move that can affect the outlook, and Global Growth is a perfect example, if i am seeing a downgrading of the outlook for Global Growth and understand that thats something that with be a unchanged stance of policy would lead to weaker growth and less progress in the labor market and on inflation than would be desirable, ideally we want to get ahead of that development and just are thinking about the path of policy in order to counteract it before it shows up as a segregation in our forecast for unemployment and inflation. Now that the may look like a shift in the reaction function and it isnt. Its simply saying were rooking at many factors beyond some list of just inflation and unemployment that should drive policy decisions, and ive tried to make clear that Global Growth was an important factor. Were trying to get ahead of it, and the market response has been favorable. You also asked to what extent did more worry play a role, and i would say it played a small role that let me say there was another thing that played a small role which is also the committee in terms of what is the long run level. Neutral federal funds rate and for that matter what is the likely long run level of gdp growth . Were really quite unsbern that. The committee that you can see in our forecasts, we we dont have such pessimistic forecasts that you would put the committee largely in the secular stagnation school, but those estimates have been coming down, too, and and in march there was a downshift, a small downshift in the committees median expectation of the longer run normal level of the federal funds rate. Gdp growth in the normal and longer run has also been moving son slightly over a longer time period and that also explains the downward shifts as well. Risks, its not the key driver, but, look, when the federal funds rate is very close to zero the asymmetry that i talked about and discussed in my speech always exist. We have more room to respond by raising rates if we get behind the curve and need to move faster, and although we do have tools, as ive emphasized, our ability to respond certainly by using the federal funds rate is more limited, and for many years that asymmetry has played a role making us be cautious about raising raids and when risks increa increase, also with that Downside Risk perhaps being a little bit more salient that also plays a small role as well. If i may, i would like to take you back to something you spent about a sentence on in answering golan which is potential gdp and in particular labor and productivity. One can look at the feds forecast and back out the tacit assumption of labor and productivity, and its over the next two years and then into the long run, and its a number in the range of 1. 8 , give or take a little, Something Like that. As you know, the recent performance over the last five years of that time series, labor, productivity has been more like half a percent per annum which means not only has the fed not bought into any serious aspect of secular stagnation but its actually forecasting an explosion relative to the last five years of productivity improvement so i wonder if you can speak about that level whats behind that optimism . So, youre absolutely right, that for the last five years i believe business sector productivity has been very disappointing about. 4 of a percent per year. I think my own estimate of productivity, structural productivity growth would be quite a bit require than that, at least 2 . Im not sure were 1. 7. I dont know where the math of that comes from. Thats a little higher than what i would have anticipated for the next several years, but, you know, a lot of that decline in productivity growth reflects a decline in total factored productivity growth or the pace of technological change, and its hard to see why that would have occurred. Its hard to see that thats that its a very unas tis pated development. There doesnt seem to be driven by any fundamentals, and are were many of us are penciling in an assumption, as you say thats just suspiciously low. I think there have also been questions about the measurement of output, and we may see when the nipa revisions come in. There are often significant reestimates of the level of output growth that could change that so we are forecasting it will move up, but i have to say really a source of huge uncertainty and really dont know. If were wrong, if productivity growth remains very depressed as it could and output growth comes in in line with our forecast, that might not be true either if productivity growth is low, but we could see a more Rapid Improvement in the labor market than were currently anticipating, and, of course, that would have implications for policy. I would like to take the conversation away from a consensus towards the hypothesis of a recession and you commented on the fact that you still have terms, particularly in asset purchases, to provide accommodation. How effective do you think thats tools would be in a potential recession through Wealth Effects in Monetary Policy acts alone, sore this something that you would expect fiscal policy to play a role in if a recession were to happen in the next year or two . So, as i indicated, i do think theres now getting to be a pretty large literature looking at the impact of our various unconventional policies, forward guidance, asset purchases, extending the maturity of our program of our portfolio. What is the impact of those actions on longer term rates and on spending in the economy . Many other countries are now using similar tools, so we also have studies of foreign experience to rely on, and the main takeaway from my standpoint is they have been effective policies. They have made a difference, and inflation would be lower and unemployment higher now by noticeable amounts had we not employed those policies. But i think theres no getting around the fact that Monetary Policy in the United States and the many other advances countries has been under a substantial burden and has not gotten a lot of help from fiscal policy and i certainly myself couldnt have imagined six, seven years ago that we would be employing the policies that we are now or that the euro or japan would be doing similar things. I think its a blend or a mix of policies that is not as healthy as i think i would i would ideally like and from a medium term perspective it certainly would be helpful to see fiscal policy play a larger role. Of course, whats made that difficult and other United Statess nations is the debttogdp ratios have risen to high levels and given trends in demographics may be on an unsustainable path and thats a very legitimate concern, but with real rates as low as they are, investment oriented fiscal policies, it is seems to me that theres a case for that, and if we do find ourselves contrary to my expectations in a world where for many years we are faced with low equilibrium and actual real Interest Rates, this isnt a transitory thing that will pass as we expect and becomes a more permanent part of the landscape. I think we will have have to seriously consider the fiscal monetary mix. [ applause ] eagerly anticipated remarks at the Economic Club of new york city there. Bill dudley, the president of the new york fed, is the master of ceremonies as she wraps up on a dais packed with lots of dignitaries from the economic and business worlds. Market reaction vary, folks, pretty positive it. The dow moving up, if we have a minutebyminute chart. You can see roughly where she began speaking in the 12 30 hour or at the point at which her text was released, and you can see it moving from red into green. Steve liesman has joined us. S p tracing a similar arc. No, Steve Liesman, they are wheeling him away, ladies and gentlemen. If you could have only seen that, you would have been amused, trust me. Theres the s p moving up. Nasdaq has been in the green most of the day. The yield on the tenyear i believe went lower as the speech was released, and she began talking. There you see it dipping down but bounce up a little bit. Again, they are at 1. 84. So that is the Market Reaction. What i would characterize as a relatively dovish speak in response to some of the more hawkic comments. Certainly when you see what the dollar did as well and treasuries is also rallying and gold spoking to add to the market response. Agreed, but a half percent moves though. They are teeny. You look at the intraday chart. Theres a definitive answer from the markets about what they think. And gold gained about a percent on the speech, and take a look at the financials. Not the sector move in the financials because that wasnt that much, but you take a look under the hood there. The regional banks which depend much more on lending, they are down by about 2 or so. Jpmorgan, bank of america down sharply and specifically on the remarks, so were seeing some very sharp Market Reactions. I think its fair to say that the curve is flattening which is bad for banks. And it will be flat for a long time according to janet yellen. Whats really interesting, two quick points. What i heard, i heard part of the speech, she said essentially the economy, both at home and abroad, is weaker today than it was at the time they raised their fed funds rate in december, thats point number one, very important. Dovish point. Point number two, when Interest Rates are ultra low and when they are falling, remember, after the december rate hike, all other rates went down. Curve is flat. Thats a sign of weakness. Rates go up when you have strength and or inflation and rates go down when you have no inflation and no economic strength and thats the fed has been out of sorts with that for a long time, and people should Pay Attention to that. Theres nothing to worry about unless five and tenyear rates start skyrocketing from expected inflation which aint going to happen. Well bring in Austan Goolsbee who severed as senior Economic Advisor and Steve Liesman as well and we can debate the size of the move, youre probably selling it more than i am. This is not very much a different speech than the one she gave in december. I read december and read this speech. Did you hear anything new or market moving from chair yellen today . Well, lets distinguish those two. I think its perspective to go back and check the language, and i wouldnt be surprised to find if the language was about the same. It i went back. I talked about larry abc observations. She did say the thing the world is weaker and the economy is relatively weaker than it was in december so that sounded a little more dovish. My basic view of the slight pickle that the fed got itself in is that for years every meeting the fed has established kind of its own noncredible credibility and by that i mean put out a forecast that is not credible, that is overly optimistic for next year that we will be booming and say we believe were going to raise rates and then when the data come in and dont match what that forecast was, the the fed would say were not going to raise rates yet and well wait next year when the growth rate is booming, and they established that cycle, and then in december they broke it. So the economy wasnt going that great, but they decided to raise rates anyway, and you now i think theres still a little scrambling trying to explain to the world, well, why did you do that . They talked themselves into that box, right, austan . I agree. Steve liesman, details aside, im kind of a plain spoken guy, is the shorter yellen headline here yellen to fed hawks should up because she seems to be basically plucking the hawks out of the air and saying no, no, no, no. We are dovish. I am dovish. We will remain dovish you know, i like your methodology there, brian, of thinking about the yellen 17page speech boiled down to a the New York Post headline, i like that idea a lot, and i think i wouldnt quite put it that way but certainly one of my leads here, one of the most important aspects here is she gave nothing to that group of folks who have spoken in the past week and kind of got markets attention by talking about an april rate hike. My problem right now is i dont know how to judge when the fed will raise rates and im wondering about a more perhaps important story thats kind of developing here which is that in december the Federal Reserve emparked upon a process it called normalization meaning a process of raising Interest Rates, and the question i have is how many months go by without a rate hike that youre no longer normalizing and sort of reset and this speech we may go back and look at as a reset here for whether or not were any longer in this process of normalization. I thought it was a very dovish speech, substantially different from december in raising the stakes on the global risks that were out there. For every positive, sometimes stronger negatives. She didnt even buy into the 1. 7 pce inflights rate thinking that thats eventually going to come down. She has some positives in the economy and they are very well offset so i dont hear a fed chair who is ready to punch the button on another right hike any time soon and im not sure what the process is for determining that. Thats interesting. Hold on, sit tight and just so happens governments borrowing money right now, fiveyear bonds up for auction. Lets get to Rick Santelli tracking the response. A weak one yesterday and how is this looking today . Pretty much the same as yesterday. I do understand. Yesterday it was a thin kind of europe holiday market. Today janet yellen put volume tilgt in the marketplace in front of auction time that traders had to deal with. Quickly 34 billion and fiveyear notes yield at the auction 1. 33 a 5. Looked like 11. 33 was trading and tailed just a bit, higher yield, lower price. I gave it a cminus, what i gave it as well. It was an unremarkable auction. 2. 8 bid to cover. 53. 9 on indirects is a bit lower than the auction average, but its the trend of late, and it doesnt fall out of place with the last several auctions. 7 27b9 about directs and 39. 9 to dealers. All in all cminus, very mediocre and tomorrow, of course, well sleet 88 billion and supply with sevenyear notes. Great stuff. Rick santelli. Larry, you were nodding your head when Steve Liesman was talking bringing up the point in a janet yellen doesnt want to raise and hes not clear exactly what the circumstances are under which they might raise in the future. I agree. I think steves got great instinct and also agree with austans point of view that this was a very dovish speech. She says basically not only is the economy weaker than it was back in december but she said theres no threat of inflation and went out of her way to cite the pced inflator and thats completely corroborated by the spot commodities that i pay a lot of attention to that has no oil, no gold. That just stopped falling after a vicious decline of many, many, many months. Steve is right there. Hes no guideline here. Theres no rush. Why is gold spiking . Thats the weird thing. Its weird. Its up 15 bucks. If you dont worry thats what you would expect, backing off, raising rates. Okay. Theres a possibility out there, interested in everybodys thoughts on this, this idea is yellen now saying shes willing to tolerate more inflation than we previously believed in december to let this thing run . When she talks about this optimal policy calling for greater gradualism, those two words were in there, greater gradualism and especially gradual saying, you know what, maybe from before in december we were talking about gradual, but now were talking about greater gradualism. I think gold. By the way i agree with what you just said, steve, greater gradualism. Gold is telling you today was an easy money speech, okay. Gold should go up on that and the dollar should probably falter a little bit on that though the dollar is still above its lows and the basic fundamental point is, again, i come back to this. Interest rates are local across the curve, and they actually have been falling since the december fed funds hike. The fed controls that Interest Rate. Thats the only one they can control. The market is telling you, a, very weak economy. Weak. And b, virtually no inflation. I mean, look around the world. The world is practically melting down in several the big components of the economy, china, europe, the emerging markets and the only question is why did they feel they needed to act in december . Right. And once you if whatever answer you come to from that, maybe they talked themselves into, it i think youve seen an effort by a lot of the fomc members and from janet today to in some sense try to tell us, well, conditions are different and just set the stage for why theres no inflation. The economy is weak. They are not going to raise rates six times in a year or whatever it was that they were predicting at the time. Austan, according to mckenzie, since last year or since the financial crisis their data from last year, global debt has grown by more than 60 trillion. As i tweeted out, is this the problem that the fed is afraid of but in some ways also the problem that the fed created . Are they afraid of their own monster . I dont know. Thats for the whole world. Yeah. Since the credit crisis since the crisis 60 trillion, since the crisis. Thats what its grown by. No. Hang on. Right, since the crisis. Youve got youve got to be careful with that, because there was a big drop. Dont want to talk about the debt. Some of that expansion all i hear from anybody i talk to is global debt, global debt. And suddenly were saying global debt is not a problem. Talking to the wrong people. Austan goalsby, back me up on there. When Economic Growth is sub par for many years as it has been, what happens . Budget deficits go up everywhere around the world. Right. And thats why is it sub par . Why . Why . Why . Thats the only question that matters. Different countries. Its the policy its obamacare. They are the enemy. I agree. The policies are terrible. Let me applaud rick for giving the cminus. You saw the report. Theres great inflation rampant throughout schools today. I didnt give that a cmineus. I gave the auction a cminus. I gave that an f. How many jobs have been created since obamacare . Wait one minute a lot of parttime jobs. I can go work at mcdonalds and they certainly are. Not even debatable. They are not parttime jobs. How come you have more jobs and no rage growth . Look at that and then scream. Oh, yeah. Before we have this ritual. Look at the data and then yell. I want to appeal to my friend Austan Goolsbee. You want better growth, i want bert growth. Yes. That will solve a whole lot of problems so when will miss yellen get up, had a great forum and blew it and say one simple thing and you know whats going to come for . Tax reform. Slash the corporate tax, go to full expensing, and make the United States the center. World investment, most hospitable. Thats the growth solution, and thats going to take care of the debt. Thats going to help wages. Its going to help everybody think. Monetary policy cant do it. Fiscal incentives, tax incentives can do it and while youre at it, austan, can we please deregulate. We have to leave it there. Well talk more, im sure, throughout next two hours or whatever else. Where did we leave him . Leave it there. Who do you work for . Your boss . Yourself . Your family . Our Financial Advisors are free to realize a plan to fit your familys unique needs. Well listen. Well talk. Well plan. Baird. Ngo to ziprecruiter. Com and post your job to over one hundred of the webs leading job boards with a single click. Then simply select the best candidates from one easy to review list. And now you can use zip recruiter for free. Go to ziprecruiter. Com. Jolo, everyone. Im sue herera. Here is your cnbc news update for this hour. Donald Trumps Campaign manage Corey Lewandowski has been charged with simple battery. He allegedly intentionally grabbed and bruised the arm of michelle fields, a former reporter for the conservative news outlet breitbart on march 8 and trump says lewandowski is absolutely innocent. Vice President Joe Biden will host turkeys president. The two will hold informal discussions with probe during a Nuclear Summit this week and separately the state department is ordering the diplomats of u. S. Military personnel to leave Southern Turkey due to security fears. And one day after a Capitol Police officer shot a man who pulled out a weapon at the Visitors Center Capitol Police in washington investigated two suspicious packages. They briefly closed one visitor entrance and two streets. The packages were cleared and everything went pack to normal. And following a poor harvest last year, vanilla beans are in short supply and causing the price of vanilla to more than double. You know what that means, higher prices for americas most Popular Ice Cream flavor this summer. The horror. Thats the cnbc news update this summer. Worth every penny. Steve, thank you. Meantime, lets check on gold price and the whole commodity complex being affected by the comments from fed chair janet yellen, more dovish, leading to a higher dollar and take a look at the move in gold around 12 30. You can see the ticks higher, closing with a 1. 3 gain, 1,246 an ounce and the rest of the commoditys complex here, green arrows across the board except for copper and 2 gains in platinum. Lets get a look at impact fed chair Janet Yellens comments are having on the market. Cnbcs bob pisani joins us with that. Bob . We were at 2045 and janet yellen, moved up ten points, in fact, holding the gains throughout the day. The weaker dollar that melissa mentioned briefly caused a rise in commodities. Xholdity stocks, your chevrons, for example and exxons which had been weak all day. Remember, oil has been very weak throughout the day rose. Exxon actually went positive briefly on that and is still falling back amojt lows. Day. Same are true with material names. Freeportmcmoran, vollet and all the metal stocks rose briefly, falling back a little bit but Still Standing near the highs. The broader markets rose on comments and bank stocks moved down as bond yields declined. Remember, bank stocks were weak before and theres bank of america and you can see the small reaction not only moving up but slowly moving to the downside. Were sitting at the lows of the day. Same with all the regional banks. Weve all been weak throughout the day and a little bit weaker even still since janet yellen came on for the regionals, and, finally, heres the line that everybody mentioned to me that was the most important to me, reflecting global, economic and financial developments since december. The pace of rate increase is now expected to be somewhat slower. In other words, she was even more dovish than she was back in december, a little different than in december here and take a look at the vix with the final evidence that the market moved this and you can see it dropping down here to 14 and change and right near the lows for the year. Melissa, can i jump in for one second. Do want to ask another question and something i highlighted. The fed seems to be leaving quantitative easing, yes, remember that open again. Heres a line. Even if fed funds were to return to near zero, the fomc would still have considerable scope to provide additional accommodation. If rates are zero, is the fed saying basically, hey, folks, dont rule out another round of bondbuying should we need that . Oh, yeah, she implied that clearly and specifically mentioned that, as a matter of fact, so, yes, although the negative Interest Rates dont appear to be there obviously. Virtually every other tool is on the table. Shes explicitly referenced there are other tools available. I think she seemed concerned from what i heard that with the rates as low as they are that that that the conventional way to stimulate a sluggish economy, cutting Interest Rates, there are limits to that. I want to she specifically said asset purchases would be a tool that would be open to her and in response it was to Glenn Hubbards question. Conspiracy theory then. Did they raise rates in december only to provide a backout without having to resort to part of qe . Definitely part of the rationaratio ratio rationae. To avoid having to go back to qe. I dont think that was incidental, but it was to get by them some breathing room in at the moment at which the economy slowed markedly they could then come in. To have a cool. Right. They wanted to buy themselves some question there. Melissa. That was actually your segment. No, its fine. Great conversation. Bob pisani, our thanks to you for that. Lets get more now on yellens impact on stocks and how to trade them at this point. With us now cnbc contributor tim seymour also an fast money trader. Look at the Market Reaction, markets are higher is this really a weaker dollar story here . Yeah. I think, anyone that expected the dollar to have this move well through 100 has ton questioning whether, first of all, not only is federal policy not all that divergent from the ecb, you know, were talking about maybe 50, 60 basis points of gdp difference between u. S. And europe so i dont think its a place where people can point to the dollar. Yellen pointed out that they clearly want to proceed cautiously and as has been stated maybe this is an even more dovish statement than the one we got a couple weeks ago. The references to corporate profits in this country, too, is spg thats notable. The fact that youre talking about Global Conditions and fears of credit and also talking about corporate profits, thats something the doves should latch on to. Tim, riddle me this. Really interesting moves, have more of the beta areas of the market and moved higher on the back of comments such as technology, such as health care, for instance, and then we also had a bid higher in gold which is now up 1. 4 . How can you and also russell. Throw the russell into that risk basket. I think, first of all, small caps like the fact that theres probably less pressure on credit. Banks may not like flatter yield kur defense and banks like the credit alleviation and small caps like it even more. Weaker dollar probably helps these guys with more access to capital. The fact that gold is rising in a weaker dollar environment is a onecell trade and the fact that cyclical stocks are getting a boost. I would make an argument that trades that didnt work the last couple of years which are cyclical trades, i note fed wants inflation, but the trades that are working are ones where youre actually betting on inflations so commodities, transports, those are things that should be rallying tech. That makes sense to me. Financials, is that a dead trade . What weve talked about on fast money and been clear to point out is although i dont think banks are blowing up, dont have a lehman moment. I think european banks will have as much capital as they need from the ecb, their earnings power is very different than it was, so these are optically cheap earnings ratios even on an assets ratio price to book but i dont think theres a systemic risk. Stronger commodities and weaker dollars should be good news for the emerging market trade which has been of late on a tear. Youre taking profits, why . My immediate picture on emerging is that trade is absolutely reversed and youre in a place here where also a weaker dollar is going to help emerging. Emerging currencies have revalued and reset the bar. I think many of these locke al economies have actually raised rates through this so rates in local curves will be a backstop. The move in brazil, quickly, mel, one based on political change and most in are being is based on the ruble rallying 7 off of oil profits. Take profits there. Youll get another shot. Tim, good to see you. See you tonight on fast. Coming up, the u. S. Government has a new target when it comes to drug pricing. We will tell you who is under the gun. Power lunch is back in two. People talk about deals on their Auto Insurance. Wouldnt a deal involve two parties discussing something . A little give . A little take . Because last time you checked, your rate was just, whatever they say it is. Why not give you some say in the matter . 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Lets bring in rob lutz, president and chief executive officer with cabot kelt management and joe duran, the ceo of United Capital financial advisers. Gentlemen, welcome. Just been having a lively discussion on the desk here of whether anybody is paying any attention to what the fed stays or does. Is there anything that you he d heard, rob, in that speech today that would make you change anything about the way youre managing money that i had . Well, weve been pretty bullish for the last few years and we continue to be bullish today. What i heard i think was that normalization has been maybe postponed a little bit but its still on tracks and i actually think the markets need the markets to get back to a more normal environment, this financial repression is killing savers, and i think having savers earn a little bit of interest will put the economy back on track so i would welcome that, and as far as where to look to invest today, i think the emerging markets is an ideal place. Minus 5 return in the emerging markets the last five years. Theres tremendous opportunities. I was just over in india a couple weeks ago, and theres some banks over there that are growing rather nicely, even in a tough environment for them, so i think its look overseas because i think thats where a lot of opportunities are today. Thats an interesting point and there are a couple of emerging market index funds or rather etfs that you could get look at but did you hear anything tailed that changed your fundamental approach to how to manage money quickly before i get to joe. No, no. I think its still a positive environment. I think were climbing that wall of worry, and i think the Interest Rate environment that the fed is going to create is going to be as we expected a few weeks ago modestly trending upwards. Its all data dependant. I firmly believe the data is going to be better than anybody expects. I think kwooesing is going to work and well actually have a stronger economy in six or nine months. Quantitative easing in europe is going to work is what youre referring to that there . Globally. Weve been doing quantitative easing for weve created more than 10 trillion globally. This is having an impact and i think economies, including ours is going to start to ratchet up very seem. Did you see or hear anything from chair yellen today that would fundamentally change what youre doing . Yeah, not fundamentally, but i think you should not ignore it. Im a little bit perplexed by the speech today. Felt like it should have been delivered six weeks ago, not today, and im not sure. Im actually surprised by the tone of delivery. It was so incredibly soft. We had been thinking that we were at the beginning. Year at four rate hikes and then it looks like we were looking at two. Im not sure were going to have two, and i think todays speech makes me wonder if well get to one and she started to hint about the possibility of dropping rates. Im i was surprised, and it does, as an investor, make you think a couple of things. Hock. Rates are going to be lower for longer than we anticipated. That means you need to be in equities or yielding stocks as an alternative, that they are more attractive. It also means emerging markets will be more attractive for longer which is positive. It means that financial stocks are more are less attractive as an alternative for a longer alternative than we thought. Miss yellen is a lot more dovish than any fed chair weve had in quite a while, and shes clearly positions today that she is as concerned in global matters as she is about u. S. Matters which is a new thing. Shes been quite vocal in the past about being u. S. Ken strich, and i dont think you want to ignore any of that. It does point to wanting to be more of a Global Investor and definitely wants you to suggest that she wants to go to companies that are large and take advantage of global situations and mega caps are interesting and it also suggests you stay with highyielding names, all of which i think were getting long in the tooth and frankly looks like in fact thats not the case. All right. So i was a little surprised. Im not as sanguine as your surprise speaker. Subtle differences between the two of them. Rob lutz of Cabot Wealth Management and thanks very much. Go to powerlunch. Cnbc. Com right knew to see why robert recommends investing in the emerging markets. Joe liked them, too. Thats power lunch, cnbc. Com. Come up, luxury lifestyle magazine has picked its car of the year and weve got one out front. Its waiting for us outside the studio. Thats ahead. Stay with power lunch, and thats red. patrick 1 whats it like to be the boss of you . patrick 2 pretty great. patrick 1 how about a 10 raise . patrick 2 how about 20 . patrick 1 how about done . patrick 2 thats the kind of control i like. And thats what they give me at national car rental. I can choose any car in the aisle i want without having to ask anyone. Who better to be the boss of you. patrick 1 than me. I mean, you. Us. vo go national. Go like a pro. Everhas a number. Olicy but not every Insurance Company understands the life behind it. For those whove served and the families that have supported them, we offer our best service in return. Usaa. We know what it means to serve. Get an insurance quote and see why 92 of our members plan to stay for life. Anything worth pursuing hard work and a plan. At baird, we approach your Wealth Management strategy the same way to create a Financial Plan built to last from generation to generation. Well listen. Well talk. Well plan. Baird. We believe in the power of active management. Anagement, we actively manage with expertise and conviction. So you can invest with more certainty. Mfs. Thats the power of active management. Welcome back to power lunch. Im michelle carusocabrera. Warren buffetts stake in wells fargo up 10 . Wells fargo today is down about 1. 5 . Origin technologies is withdrawing its 17 per share for affymetrix and they are lower by half a percent and keryx pharmaceutical announcing a latestage trial for its drug treating anemia and kidney it is. That stock is up 11 . The s p is up by 9. 5 points, 2046 is the level. Take a look at sectors on the move at this hour. The toulousing sectors out of the ten on the s p 500 really being impacted by the comments from fed chair janet yellen, financials, of course, the notion being the yield curve is flatter which is not good for profits and particularly the lending banks like the regional financials. Financials are down by just about half a percent and Energy Stocks really being clobbered by the pullback that were seeing in crude oil and wti down by 2 and Energy Stocks by. 4 and seeing some grains here. Ing fromly some of the best performing sectors. Year continue higher, utilities and telecom with Interest Rates remaining low. People will continue for these sectors to look for yield. Now to dom chu with a market flash. The gdx, thats the ticker that tracks gold in terms of the overall recall miners is up about 4 . This as fed chair yellens kind of dovish tone sent gold prices higher. They had been on bit of a shorter downtrend. The etf that attracts the miners is up 40 tracking for its best quarter since its start back in 2006 so among todays leaders, names like kin ross gold, yamana, new gold and gold fields all up between 4 and 8 near their best levels today so, melissa, gold prices moving and a weaker dollar is helping that trade as well as the likelihood, programs, of more inflation down the line. Back over to you. Thats why were seeing material stocks higher today. Dom, thank you. Coming up, more reaction from the fed to one of the biggest players in the bond market. Thats next. Something we all need to do. We create, invent and formulate amazing paints, coatings and materials. So we can make the world run faster, stronger, fresher, smarter, cooler, lighter, greener and better for the next generation that comes along. Ppg. We protect and beautify the world. Youre an at t Small Business expert . Sure am. My staff could use your help staying in touch with customers. At t can help you stay connected. Am i seeing double . No maam. Our at t buy one get one free makes it easier for your staff to send appointment reminders to your customers. And share promotions on social media . You know it now im seeing dollar signs. You should probably get your eyes checked. Good one babe. Optometry humor. Right now get up to 650 in credits to help you switch to at t. Welcome back, everybody. Im brian sullivan. You just heard from fed chair janet yellen. She said the u. S. Economy has been somewhat resilient, but the Federal Reserve will proceed with caution and remains very, very dovish. Lets talk more about this and why you should care with the executive Vice President and Market Strategist with pimco. Im an easily confused guy, tony. Not as smart as you and please help us figure this out. Janet yellen honestly confusz me. I understand theres some big macro problems we have with the economy. I get that. They have been around for years. They will probably stick around for years. Home prices up 7. 5 , joblessness down and job openings up. What is she seeing to be so things are still terrible in the economy . I dont get it . Well, its not necessarily this, brian. Look at the 15 references that yellen has in her speech and the 12 footnotes. Look at number nine, Reference Number nine to a speech from charlie evans, one of her colleagues on the fomc, a paper from march 2015. It speaks to Risk Management for policy at the zero bound, and what calls for as it says in the conclusion of the paper the idea that the fed should be especially cautious, words that the fed chair used today when the federal funds rate, target rate is near the zero bound because if the fed makes a mistake, if it tightens too soon, tightens too much, what would it do then in response to a weakening of the economy. It would have very little ability to respond to shocks or an economic downturn. I hear all that. I hear all that. But you could make that argument safety first. You could make that argument throughout history and the next 1,000 years. Right. Dont let the kid go to the playground. He might fall and hurt him level. Right. In fact its a bit circular, one could argue. She says and its in the fourth paragraph and the second to last paragraph which means shes really meant to emphasize this. She said that markets are acting like an automatic stabilizer and the Federal Reserves outlook for inflation and employment and growth hasnt changed because markets have improved and lowered their projections for the rate hikes the that exist in the future and only one quarter rate headache is expected this year, the next year and the year after, and this automatic stabilizer she is saying essentially i dont want to disrupt but oddity of it is that the Dow Jones Industrial aver e average, the broader stock market is higher than it was at the start of the year more broadly speaking with respect to stocks. Sure, theres been a roller coaster ride in between, but her use of markets as an excuse to not tighten amid the conditions you mentioned, brian, is a little odd. Thats why i referenced global debt growth earlier in the program and everybody said its wrong, its wrong, its wrong. I dont know. Trying to find something that shes looking at to the give her this grim world view and maybe its the british exit, the brexitor global debt because i could point to 50 instances and so can you, where the u. S. Economy has been worse than it is now but rates higher, and i i dont know what shes looking at. Well, probably as i said, Risk Management. Remember, the world hasnt solved two major issues. Of course, one of these is how to promote Economic Growth and dont see anybody acting much to promote. Think of what will it do to promote Economic Growth and what will europe or japan do to Economic Growth and it hasnt solved that had riddle, the aggregate band problem or nor has it solved the aggregate debt problem. More indebtedness in the world because of the transfer of debt from public to private Balance Sheets and these two issues linger and if youre looking for, brian, an indicator that yellen is looking toward, friday theres a jobs report released and whats widely filed is the u3 Unemployment Rate, the yield report when you report the news, the 4. 5 and the u6 rate that people dont follow closely is 9. 6, the people on the sidelines and working parttime and who would rather work fulltime and probably constitutes full employment is 9 so if youre looking for a number. I guess that would be it. The u6. Were getting into my whole point of this, tony, and i appreciate is try to get out of the weeds and talking about gradualism and pc did flatters. I want to know what the fed is looking at to make them thing that everything is so terrible. Thanks so much. Michelle, maybe you can happy me mouth. A number of areas beyond stocks moving big time on the back of yellens very dovish speech today. Lets show you whats going on with yields and the twoday note. This is the yield, it has dropped and gold has moved higher along with gold miners. One again the intraday chart, not showing you an intraday, but you would see a pretty definitive move upwards when it comes to gold. Bank etfs are lower. If you think the curve is going to be flatter for longer. Much harder for banks to make money and jpmorgan, bank of america and Morgan Stanley also lower. The emerging markets etf, lets show you what that is doing and its higher by nearly 1 in the wake of Janet Yellens speech and the concept of earlier money and the euro spiking against the dollar, not a surprise either. Lets bring in senior economics reporter Steve Liesman. Keep calm, proceed cautiously. What she said. More than once, steve, she made reference to the markets, cognizant of market response to what shes done. Is this going to open her up to ever more criticism that the fed has become a creature of the markets rather than a steward. Economy . I think so. I mean, you know, people have been criticizing the fed for all manner of things over time. Whether or not that is warranted, look, the markets have been and always will be a major conduit for the fed to conduct policy. They need the markets on board, but one thing i did notice, let me just tell you one sound bite here which is he talked about the outlook for rates was very dovish and talked about this idea that the federal needs no move with greater gradualism and emphasize the global risks that were out there and the risks to the u. S. Economy and growth to inflation. Heres what she said. In particular, developments abroad imply that pleading our objectives for employment and inflation will likely require a somewhat lower path to the federal funds rate than was anticipated in december. Given the risk to the outlook i consider it appropriate for the committee to proceed cautiously in adjusting poll. I so she continued to say rates would rise, and im going to get to michelles question, im not avoiding it, but she gave little clue as to when the next hike would come and general tone did not suggest anything imminently. Sever fed members recently pointed to the possibility of an april or june rate hike if the economy continued to improve so what about the economy . Yellen said here are the negatives, manufacturing, next exports hit by slow growth, the strong dollar, Capital Spending lackluster, hit by the collapse in oil price. A couple positives, labor markets, Consumer Spending and housing growth and fiscal policy as well thats going to help the economy but she questioned the one obvious reason for hiking, rising core inflation and she suggests she had her doubts that the pace of Inflation Gains would continue and now the comment and decline in Interest Rates is offsetting the recent weakness in the economy. Its another way, michelle, of her saying shes happy with where the market is priced right now. Remember, thats another example. Of abuse the market to affect fed policy, that the Global Economy weakens, something that comes all the time and Interest Rates come and thats an offset. Shes not jawboning rates higher. To underline one particular thing that you brought up, say you were cuba all last week and missed all the fed talk. Who might have been in cuba all last week. Right. And people sounding much more hawkish. Right. Was this her saying ignore all those other people . Im the one in charge and im dove strategic defense initiative. A rule that i learned very early on as a fed reporter, i still didnt have hair that early on, but very early on, if theres a disagreement between the chair and the president s, follow the chair. I was very interested that the president s included centrists like John Williams and dennis lockhart. Look, im not ready to say this but ill speculate about this. The fed entered no a period of normalization or a process of normalization in december. In her december speech, december 3rd she used the word normalization and normalizing twice and normalization is not in this speech at all. It may be that they are ending this process. If the fed is in the process of raising rates and doesnt raise rates for several months, is it longer in that process of raising rates . Out of normalization . Are they out of that problem . A pretty significant difference from the december speech. I think its a big difference. Tyler. Maybe things are normal, i dont know. Well talk more about parsing the text of chair yellen and also about parsing the footnotes. Elon moui of the Washington Post is deep in the footnotes as was tony and diane swonk is ceo of sdo economics. She said janet yell owen temporarily caged the hawks did. She do that . She did and she was dovish in her comments and it was really interesting. She sort of took on full throttle one of the bigger hawks on the fed which is her vice chair stan fisher but talking about the 1970s. One of the things you hear sort of a generational gap in the fed is a lot of fear that were going to return to the stagflation. 1970s. Dan experienced that and so did chair yellen and also experienced as a policymaker the 1990s in the u. S. Hand thats where shes focused and thats deliberately saying in the 1970s inflation got unanchored, our expectations did and it went up and that was really bad. Now were really worried about the inverse occurring and thats really completely pushing back at hawks. Not only are we not worried about inflation picking up that could be transitory now. The transitory effects could last, Lower Oil Prices and a stronger dollar and on the flip side we could unhinge the expectations. Something that really matters. Unhinge as go into deflation . What are you saying . Go lower and have a period where they would never get up to their target even as the unemployment rail went down, that lower expectations may somehow feed into much like they did the opposite of in the 1970s, we saw higher inflation even algts economy was stagnating. You could see lower inflation even as the economy is supposedly supposed to heat up and that would also be not productive. I want to get your take on this and i want you to explain because maybe i misunderstood something tony was talking about and something in my notes pertaining to one of the footnotes there where the chair was talking about how the closer you take Interest Rates to zero, the more the less the feds ability to the affect the economy in case of some shock that comes from the outside, but paradoxically the closer you get to zero the more careful you have to be about moving Interest Rates higher. Am i understanding that concern correctly, elon, and what does it mean in a practical sense . I think you are. This is something that yellen mentions in footnote number nine. Shes known for having very detailed speeches with very detailed footnotes that go along were it and talks about policy attendation, essentially the federal is less powerful is closer it becomes to the zero level and thats what she mentioned the text, the idea of asymmetric risk, the fed arguing if inflation picks up, we know how to deal with that and can raise rates very quickly but we have limited ability to respond to a shock in it were to occur and thats why its a bit more difficult. Where does the other part of the asymmetry come in that it makes it harder to move from 50 half a percent to. 75 , to 1 . Why is that implied . The ideaed is that you would remain, therefore, more accommodative because you have less power, you have less room to cut, right . Ah. You cant cut so you might as well stay low, but this is real an important argument shes adopting in the speech because the argument that we heard from her in december for raising rates and starting, as steve said, this process of normalization was this idea that we want to start sooner so that we can go slower. Thats that idea exactly. Two questions for you, three questions, one, are we still in a process of normalization . Two, wasnt Glenn Hubbards question about whether the reaction function has change the the best question asked and, three, do you have any idea what yellens answer was when it came to the question about whether i didnt get it. I listened very carefully. I dont understand the answer to that critical question is the way the fed reacting now to data different from how it was before . Steve, i think her answer to that question was the closest that i have heard the fed come to saying that perhaps they made a misjudgment in december. There you go. Stand up and applause for elon. Was if think not hiking now, then december may have been a mistake, right . Thats where we are right now . In other words, they had to retreat and had to hold. Certainly they are not advancing any more, tyler. Right. And they would argue, ill just say. They would not use the word mistake, misjudged. Brian wants to jump in and hes frustrated. Would also say that circumstances have changed but whether or not they have change that had much is really the question. Steve, this is really important, too, the idea of data dependence, you know, the data has been all over the place, which data, and thats one of the issues were starting to get to, too. Discount it had as well before she got to the questions and answers and discounted, well, at one point 7 , thats something that many people in the fed are okay, got to raise rates on copce and now thats not enough data and thats really important that this might be just transitory, that we could see all of a sudden the transitory factors and low oil prices and a dong dollar, that those could come back and bite us again. I thought that was really interesting as well that all of a sudden, you know, sort of shifting the target and the tlish hold. We can do all of this kremlinology over the text and the footnotes and so on and so forth, but has anything, diane, fundamentally changed as you look out over the next year of how you would view the investing climate . Well, you know, actually, im a little bit more optimistic than i was at the beginning. Year because it was just so dire as markets were churning. I think part of reasons were not seeing that is the fed has sort of backed off a little bit and were not seeing as divergent Monetary Policy. Are they backing off because they are worried . There is more worry abroad. The fact that she focused on china again and growth abroad is another concern and talked about it not being smooth. Talked about the transition meaning this is bumping. Thats not good, talking about turbulence in the Financial Market and discussing it in a more overt way. Something they have done on and off since august when this all fell apart and steve talked about that in august, but i think its really something thats much more at the forefront and its become more at forefront and it should be and the fed turned a deaf ear to it in the past thank you all. Well hear more from the fed tomorrow. Wouldnt be a day without fed speak. Weve got [ speaking french ] and fed yellen. Charles evans exclusively on squawk 8 30 a. M. Im sure there will be good questions for him. Thats tomorrow. Lets get to dominic chu for a market flash. Tieler, ibb, the nasdaq biotech etf. Its turning positive now, up by about. 75 as the overall market gains on the yellen at leastien erins cautious comments. The etf was tracking for its third neglect sieve session and started off pretty bad, still on pace for its worst quarter since 2002 but the ib. More coming cup on power lunch. Back near two minutes time. [dad] i wear a dozen different hats doing small gigs,side gigs. Gig gigs. Quickbooks selfemployed helps me get ready for tax time. To separate expenses,i just swipe. Its one hat i dont mind wearing. [passenger] i work for me. And so does quickbooks. It estimates my taxes,so i know how much stays in my pocket. And thats how i own it. [announcer] stay in the flow with quickbooks selfemployed. Start your free thirtyday trial today at joinselfemployeddotcom. Welcome back to power lunch. Im melissa lee. After rallying from the november lows stocks are now at twowoke lows and according to china daily the countrys pension fund is likely to start investing in chinas stock market. That could bring nearly 100 billion into that market. Could that be the catalyst that sends the stock market higher . Andy rothman is investment strategist with the largest Asia Investment arm in the u. S. , more than 31 billion in assets and 16 mutual funds. End, good you have to on. The shanghai market is a 4 trillion market, 200 billion also, that make a difference . Well, thats going to come in very gradually so i would not suggest that anybody wants to bay that because of this and this is part of our longer term strategy. It means that well see continued development of the institutional side of investing in china which is important because the main reason in the market has been so volatile is that 58 of the turnover has been retail and thats changing. Its true there would be more institutional dollars but the Chinese Government has not been chi in mandate when an institution can sell or when an institution should buy so real riley theres more institutional dollars the Chinese Government ultimately controls those dollars, dont they . I do, but i think what they have been telling us they want the Social Security fund and insurance fund, both of which are allowed to vest up to 30 toss 40 of the assets in the execonomy market that they want them to do this for the long term so im hoping they wont be using these funds at shortterm tools to try to most market one way or the other. You know, thats what i worry about, andy. Intuitively i get it. Pension funds invest in the market. Thats what they do and how they get returns for the retirees, et cetera. Presumably as chinas Financial Markets mature, okay, they do that, too, except for melissas point about hour so intraventionist they are and i worry about the Chinese Investor at this point. Maybe i shouldnt. What do you think . You know, i think that its something to be concerned about, but the track record has been that they have kept that separate. I think the last thing that the government wants to do is put at risk all of the Pension Funds for its retirees so when they have intervened in the market and that clearly was a mistake last june, and i hope that they learned from that and wont do it again, they didnt use that pool of money. Lets hope and see. Were going to go because we have breaking news to tell about. Brazils Largest Coalition partner for dilemma rousseff has decided to leave the coalition that holds her place which means essentially shes far more likely to face the possibility of impeachment. Needed the party to stick with her to stay in party and get the votes she needed. This was terrelle graphed this morning so you wont see a huge move in the market. There was an official vote with the party and that weeks pected to happen right about now and that looks like its happened. The brazilian currency has been all over the map in anticipation and the stock markets are moving higher as we get closer and closer to the possibility that she may be impeached. Does that leave a Vice President in charge . If she goes the Vice President , and the problem is the Vice President the same party, sglekt. And he also has corruption issues to face as well so its the third person. Remember the Tour De France when they couldnt award the prize as well because every Single Person has been on drurk the same problem youre facing with the brazilian leadership is each person thats supposed to take over has different issues. Whats interesting, michelle and melissa and tyler, there is a bit of an interesting investing angle other. About the nuance of brazil and dilemma rousseff and the workers party. The brazilian stock market is up 21 this year. Literally when you go back to theed aages like rothchild, you buy when theres blood in the street. When you looked at brazil you say inflation is rampant, things out of control and politicians being arrested and billionaires being thrown in jail. Literally no reason commodities are collapsing, no reason to invest in brazil at all, right and yet its up 22 in three months. Right. Now there are now calls out on wall street saying sell the news if dilemma rousseff gets impeach and thats as good as it gets. The number two guy is more market friendly. Remember, its in their constitution that the pension rates have got to be set towards inflation, right . They have almost no fiscal control over their budget unless they change the constitution when it comes to worker salaries, pensions, all indexed and all out of the government control . Telle sell the news is sell the investigations into corruption, petro brass. Sell her impeachment, specifically her impeachment. Im saying thats an interesting lesson. Absolutely. You couldnt point to anything positive around brazil except for the olympics in a few months. Just looked at it on paper, say heck no, i would never invest in the that 2, 1 to the upside this year. And if you want a really good Interest Rate you can see if you give brazil money for 20 years you get 13 . Dom chu also looking at the etf. Looking at the etf market that got us thinking about whether or not we do see a Market Reaction here during our u. S. Market hours. You can see here we have tracked it up by half a percent now. Were seeing positive territory and also watching shares of another one as well, the ewzj which is the smallcap brazil etf, and those shares are up as well. Again, some movement here along this, but as michelle pointed out a lot of this was fairly terrelle graphed so were not seeing a huge spike and were near our best levels of the day for our etfs more levered, guys. And had seen a general emerging market rally along with yellen as well so that could be part of that as well. Well be right back here on power lunch. Dont move. Got a ferrari coming up. Thats really cool. At t helps keep everyone connected. Right now at at t, buy the new Samsung Galaxy s7 and get one free. No matter how you hang out, share every minute of it. Buy one water resistant Samsung Galaxy s7 and get one free and right now, get up to 650 in credits per line to help you switch to at t. A lot going on. Let get actionable idea. Analyst recommendations on stocks you need to know about. Stock one, chipotle, another analyst throwing in the towel on wedbush, cuts to neutral and slices his price target, about 14 below where the current price is saying the valuation reflect an overrealistic outcome and the sales projections for 201 is the projected best case scenario. Finally analysts have come around to the idea, the idea, that perhaps its original customers may never go back to chipotle and so thats why thats being pushed out even more in terms of a recovery. Two words for you. Quesa loopa. Take a look at j. D. Punt, the analyst sounds bullish saying they are projected to generate growth and Burlington Northern as well as Norfolk Southern will give a boost to the low growth but against the backdrop of gdp growth in the 29 to 2 5 range, analysts say time to time prasts here. And the stock has done well. One year down but over the last three months up 13 . Pacificiest says you need to own this stock. Maybe we can call this a body slam dunk. World wrestling entertainment. They are positive on that saying the companys position and navigating the future of tv, intimate based networks wwe network, saying they are likely to drive strong growth and they start coverage with an overweight rate and target on wwe. 22 upside and no comment on the body slam dunk. No. You just burned out at this point. Thats okay. Linkedin get a downgrade from overweight and take a look at the move in the stock, well, barely a move at this point. The price target is getting slashed to 130 from 205 but still 130 implies a 19 upside from mondays close. Analysts saying they will contract materially. The Revenue Growth is more than expected and likes the flatter roger term and says its a stock tough to value using the standard metrix. Linkedin, getting bert and tougher because so much of their money comes from job placement firms so if you have a job, dont need to be on linkedin. Stock five. Always our smaller under the radar name, Old National Bank corp, evansville indianabased bank with 11. 5 billion in market cap. Raymond james upgrading all why do you say it like that . Potter is not buying, selling. To an outperform. Recently hosted a meeting with the ceo and liked what they heard. Credit trends were improving and analysts say they still need had a little bit of work. Loan growth may ping so his target on Old National Bank corp is 15, providing about 15 upside. Oil is sliding today. Street talk is down about 7 in just one week. Were live to the nymex for the closing trade. Man 1 [ gasps ] man 1 he just got fired. Man 2 why . Man 1 network breach. Man 2 since when do they fire ceos for computer problems . Man 1 they got in through a vendor. Man 1 do you know how many vendors have access to our systems . Man 2 no. Man 1 hundreds, if you dont count the freelancers. Man 2 should i be worried . Man 1 you are the ceo. Its not just security. Its defense. Bae systems. All right, folks, the dow at session highs up about half a percent at 17,632. Nasdaq with a much more robust move higher. The s p up by. 75 , in response to chair yellens speech about an hour or so ago. To sue herera now for your cnbc headlines. Sue . Hi, ty. Heres whats happening at this hour starting with gop president ial candidate ted cruz campaigning in milwaukee weighing in on the Trump Campaign manager Corey Lewandowski being charged with battery. Its a very sad development. And this is the consequence of the culture of the Trump Campaign. The abusive culture. When you have a campaign thats built on personal insults, attacks and now physical violence, that has no place in a Political Campaign and has no place in our democracy. In washington by a 44 split vote the Supreme Court rejected a challenge to union fees following a Lower Court Ruling that allowed california to force nonunion workers to pay fees to Public Employee unions. The fees add up to millions a dollars of a year for the union. North carolinas attorney general is calling the states new law discriminatory, unconstitutional and a national embarrassment. At a News Conference this morning, roy cooper said his office would not defend in court a state law that prevents local governments from enacting antidiscrimination protection for lgbt people. And Los Angeles Clippers point guard chris paul says hes withdrawing from consideration for the u. S. Mens Basketball Team that will compete in the summer olympics. Paul says his body is telling him that it could use some time off. And that is the news update this hour. Melissa, ill send it back to you. Thank you, sue herera, oil prices sinking once again and they are closing for the day. Jackie deangelis here with the word from this hour. Jack . Reporter after janet yellen spoke, despite the action in saw in stocks, wti finishing at 38. 28 and did droe below 38. It says fundamentals are back in focus and well get inventories from the api and doi and expect overall stocks still at pressure highs and thats whats pressuring the market. The dollar is going to be part of the story so watch that closely, too. Back for you. Jackie, thank you very much. Well, its time now for trading nation because after all traders trade better together. Lets talk two things. Energy and brazil. Were going to split it and do it a little different this time. Max wolf chief economist at manhattan stacy partners and Stacey Gilbert at susquehanna. Im going to start with you and oil. Your take on whats going on now and more importantly what is likely to happen. Yeah, brian, fair question. So in the etfs and options that we interesting, if anything the sentiment really seems to suggest Less Movement with a slightly bearish tone so if we look at the etfs specifically weve seen money come out which is not surprising. A lot of it could be profittaking but i think a notable takeaway here is we havent seen significant inflows into some of the levered inverse funds which we typically see when we see a spike in crude so were not seeing positioning for a sizable pullback here, but weave definitely seen money come out. On the option side and what i would highlight, no positioning for a huge pop but no positioning for a big pullback. If anything its positioning for Less Movement at 2. 4 which is ironically what we saw today. We should expect to see almost two times per week, 5. 2 Percentage Points of what weve seen, the lost 50th percentile of what weve seen and if anything volatility coming out slightly higher. That you can begun all the brazil, the market up 21 year to date. Is the that though going to converse, flip and go back down . Near term i think youre going to see a real retrenchman here and see that across a lot of Asset Classes broadly and had the second half q1 rescue which got a ton of momentum in part because very active hedge funds were trying to survive and not be crushed under a wave of redemptions. Brazil continues to move higher though long term. I think this is a pretty unloved story as of late even though its had a good story to date. Got really beat up in 2005 the and has a lot of Political Uncertainty with multiple and backward looking impeachment processes and a possible serious changing. Guard from the worker friendly and more western friendly and business Friendly Party so long term majorism prove and short term its gotten had a little over its skis. Sell the rally. Fade the deals and keep an eye on the long term for stocks with bright futures. For more trading nation we do two additional online segments every day. Go to the internet, tradingnation. Cnbc. Com. Lets get a market flash with mr. Dominic chu. The etfs at its best level up over by a percent. Component wyse, take a look at lennar breaking through its 200day price average this time last year and the stock tracking for its best day since march 1st and that on the heels of earnings. Many brian . Shares of medication are falling 8 , the prostate drug a target ever lawmakers who are starting a campaign to force the company to lower the price. Well speak with one u. S. Senate who is leading the fight against higher costs. Plus, Robert Francke had a chance to test drive that car. Parked it outside. A ferrari 488. Michelle and i may nant. Were going to show you that car and all of its glory now. Every Auto Insurance policy has a number. But not every Insurance Company understands the life behind it. Those who have served our nation have earned the very best service in return. Usaa. We know what it means to serve. 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Lets talk about how digital works for your business. A group of lawmakers calling on the National Institute of health and the department of health and Human Services to reduce the cost of Prostate Cancer drug. It was licensed by med vags and the stock is trading lower by more than 7 . Minnesotas senator Amy Klobuchar who has helped author had a number of pieces of legislation that aim to lower the costs of Prescription Drugs. Senator, great to have you with us. Thank you, melissa. The mechanism through which the government through your group would like to lower the cost of the drug specifically is a thing called the baie dole act which allows the government to go in and lie cents invention, in this case the drug, to a third Party Without consent of the original patentholder or original licensee whenever its not made reasonably accessible to the public. What is reasonable . What price point would you use to say now this is reasonable . Would it be the 39,000 charged in sweden or japan or the 30,000 charged in canada . First of all, we know this is a tool that hasnt been used very much and the nih has shown an interest in using it again. Have you to go back to 2004. They began proceeding through and then the company that had the license or actually had voluntarily reduced the price of the drug. In this case what we know is that the price that we see out there now is outrageous. This is a prostate drug, xtanti, the research was done by ucla army research, nih research, public money and now the price, as you point out, is 129,000 for a course of treatment in the u. S. In japan and sweden it is a much less than that. Its in that 39,000 range and in canada its down to 30,000. That is a major difference, and so what were asking for thats for the nih to determine and thats why were asking for a public hearing so they can make the determination. Very a situation right now in america where our drug prices are twice that of canada. Thats a 2015 number. We have a situation where with between the years of 2013ed a 2014 our Prescription Drug prices increased by 12 . The solution is not just this one. This was one tool in the toolbox. There is pay for delay where the Generic Companies and the pharmaceuticals are in cahoots costing us Something Like 3 billion a year over a number of years, taxpayer money. Senator grassley and i are trying to stop that. We have no right to negotiate under Medicare Part d. Thats push pentagon prices up. Theres a lot of things we can do. That was going to be my question, senator. What would you do . Obviously you cant use this rather technical patentbased solution in that hundreds of cases where americans pay more than people in other countries for drugs i . Assume that the main thing you would try and do is is allow medicare to negotiate prices as Health Systems in other countries do . Is that the main tool, hammer that you would apply here . Thats what id like to see, im leading a think of all the taxpayer money put into drugs and then to be charged an exorbitant rate when its our people who paid for the research, our country, a tool we should look at using more and i dont think wed be there if in fact there were other mechanisms in place including stopping the pay for delay deal. Senator, just to take the other side of this. Ucla has vastly benefited pand they are saying they can use that be money because federal funding and state funding of Research Programs and scholarships and fellowships on its campuses just isnt there anymore and at the same time med vags took the risk, got license in 2006 and didnt get fda approval until 201. How do you factor in the other side of the market because it wasnt like this drug was licensed in med vags it was a Million Dollar blockbuster drug . There was a risk on the part of the company and ucla is still benefiting . Im sure that will all come out in a hearing and arguments can be mailed. Thats why you have a hearing and were not special fike at what point it is considered reasonable. That law, the bayh dole law was put in place for all that kind of thing. Investing taxpayer money and why are our taxpayers playing more than everything where else in the country and its because someone has prostate cans ker and they to have spent 129,000 when they with go um to canada and get it for 30. We know in one kiss, yes, they did not end up licensing it to a thirst period but enough ever a push to have them bring. I know you were on the subcommittee on terrorism and we want to ask you about fighting terrific. Well be right back. Lios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Its time to bench the benchmarks. Welcome back to power lunch. Lets turn to the war on terror. I just returned from brussels to comfort attacks there, and today were reading more and more about how European Security agencies made many errors in dealing with Islamic State terrorists. Still with us is senator Amy Klobuchar, a member of the Senate Subcommittee on crime and terror and cnbc contributor larry kudlow is here as well. Im great to have you here. When youve seen whats happened in europe and all the mistakes they made, ignoring turkey. Are there any lessons for the United States in whats happened there, or are you confident that were safer here relative to the protections that we have compared to whats happening over in europe . Well, i think we all know we had our big trajik wakeup call on 9 11 and many of our procedures changed. Many of our procedures related to paths forward and other things and we have the 9 11 commission that made had a number of recommendations, but we still know that there are other things that can always happen and when you have people that want to do evil you have to be always one step ahead of them. That comes to Airport Security when you want to talk about problems, a report back in june show people were able, to inspector reports, able to sneak in various weapons. Have you had communications with your counterparts in europe and if yes has it given us any insights into what we can do . Well, i think our government certainly has, and one thing that we know is that were not doing the investigate and taking the warning signs. They have admitted that. Two ministers in belgium tried to resign over this, as you know, and so i think that they are going to have to greatly upgrade their security measures. In minnesota we know a little bit about this. We have dozens of cases of indictments, federal indictments, for al shabab and isis, for fighters, people that are actually on our own soil that want to go to be foreign fighters, and weve been successful in bringing those cases because we have worked with the community and our u. S. Attorney has aggressively worked with the community to bring those cases so that has to be happening there as well in belgium and france. Senator klobuchar, i want to ask you this though. I understand all the intelligence issues and understand all the prevention issues, you know, and god bless all the Police Forces that are doing this, but my view is were playing too much defense here. We ought it take it to them and destroy isis. Lets destroy isis. The question i have for you is destroy isis. General joseph vodle, a special ops expert has been appointed head of the mid east command. One of the first things he does according to all sources, puts together a plan that would essentially destroy raqqa, which is the isis capital, the caliphate capital, where the planning is done for these global bombing operations. He puts up a plan, bombing people on the ground and president obama says no. He rejects the plan. I dont understand that, either we want to win this thing or dont want to win this thing. How can we not bomb raqqa for heavens sakes . I would want to discuss that with our military experts and what the president s reasoning was. I have long supported a no pli zone in syria. I went to jordan with Lindsey Graham and others in turkey and met with some of the forces in syria that wanted to take on assad, some of the rebel groups and others. And this has been an incredibly difficult tragic time. So i still support a no fly zone. I think we need to be more aggressive and youre starting to see but senator if i could go ahead. You mentioned Lindsey Graham, one of the most hawkish. He wants to put 20,000 troops on the ground, special ops. I know he does. He also along with senator mccain and general vogle, they want to campaign against raq quqa and take away the real estate, they cant operate. Thats doesnt mean were going going to to end terrorism worldwide. How can president obama say no to that . I dont get it. Okay, i would want to look at the exact but clearly in the long term thats what we want to do. We want to work with all lies and have other forces on the ground besides americans that are there val yantly working to get the syrians trained and others. But i think this idea of working with our eye could i add one thing, when we look at brussels and charges brought in minnesota, we still and should do everything to hit them where we are and again, this plan in the long term of course we have to take that away from isis but you mentioned a no fly zone, senator. People are being recruited regardless of getting rid of their territory you mentioned the no fly zone, isis doesnt have planes. This is about creating a territory thats safe for people where they can transport goods and go back and forth and i believe it would stop some of the refugee flow but theres one thing we have to talk about, you have home grown terrorism and people being recruited i get that. I appreciate that. We have to go after, its a twoprong strategy. Were out of time. I want to ask you one last one because youre in the middle of this thing. Why in the world has president obama not declared war on isis . Theyve declared war on us. He has never declared war on them. If were going to rally this country and other nations around the world, how can we do it without a war declaration against isis that wants to wipe us off the map of the earth . Well, i think you know that were still working off that declaration of war, declaration that came after 9 11. Im personally one that believes that we need to do a new authorization of military force. Its called aumf and i have advocated for a new one that is more specific about isis. We have not had that brought to the floor yet. There was one voted through at the end of last year thats one that should be targeted to the real situation of today. Senator, thank you so much for joining us. Thank you very much. Power lunch is going to be right back. We needed 30 new hires for our call center. Im spending too much time hiring and not enough time in my kitchen. announcer need to hire fast . Go to ziprecruiter. Com and post your job to over 100 of the webs leading job boards with a single click. Then simply select the best candidates from one easy to review list. You put up one post and the next day you have all these candidates. Makes my job a lot easier. announcer over 400,000 businesses have already used ziprecruiter. And now you can use ziprecruiter for free. Go to ziprecruiter. Com offer500 tavi gevinson. Trendsetter, tastemaker, and teenager. Watson, you sound like a fan. Millions look to you for advice. I know. I cant believe it. I am learning to analyze social media to spot trends and predict demand. Sounds like you spend a lot of time online . I constantly absorb online content to follow shifts in pop culture. So. Youre learning to think like a teenager . Yes. How am i doing . Well. Uh. After testing 13 of the most High Performance sports car, the robb report has named their luxury car of the year, robert frank. Its the ferrari, 488 gtb. This is the best selling car. Retail price starts at 245,000 but this model and most of them goes over 300,000. Even at that price there is a twoyear waiting list. Anyone who is worried about the prospects of ferrari and have money to spend on super cars, a twoyear wait for this car. Is anybody worried about that . I read that sergio, ceo of fiat, this is his favorite car. He can drive them all. The predecessor was the best car god ever created. This one may be better, its turbo, its lighter 0 to 60 in three seconds. For ferrari this is the most important car for them right now as they stay public and seek to increase sales while not over increase production. Going to turbo was a big risk because ferrari purists said you cant have a tur bow and have a famous engine sound v8 though. Its so windy, that the car is so sleek you cant even see the wind going over the car. You have to be very careful because he wants to drive this so you better get in there first. Im going to get in. I cant wait to hear it. Its going to sound beautiful. Its a lion purring and the cockpit is like a mother hugging a child. Robert is that child right now. Yes. Go ahead, robert. Beautiful. [ engine revving ] slow down partner. Did they lift the gate . They are going to let you out of the parking lot, right . Look at the car of the year. Bye, robert frank. Jerk. I should have gone for a ride. Guys, that was fun. Back to you. I cant believe you guys didnt hop in and ride off into the sunset. Theres only room for one in that car. Cars are works of art when they are at that level. They are works of art like some womens shoes are pieces of art. Hes never coming home. You can never have too many ferraris or louboutins. The markets have been in a very nice mode since then and suggestive of slower and lower Interest Rate moves this year. S p just off of session highs. Thanks for watching power lunch. Closing bell starts right now. Kelly evans at the new york stock exchange. And im bill griffeth. Drama at google. Multiple units with their own ceos. The structure could be causing some headaches internally. Will shareholders feel the pain though externally . We have details in a couple of management gurus to assess the situation there. Warren buffetts stake in wells fargo reaching 10 . Now open to more scrutiny from the Federal Reserve. Well have more on what this means to billionaire coming

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